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- Coiled Spring Capital MR 4/20/25
Table of Contents
Introduction
We hope everyone is enjoying the holiday and getting a well-deserved break from the chaos of the markets.
Earnings season is now in full swing. Despite a notable lack of forward guidance from many management teams, investors appear willing to accumulate shares. Over the next two weeks, more than 60% of the S&P 500's market cap will report—providing a clearer read on how the market digests a season marked by uncertainty.
So far, results have been better than expected, with 73% of companies beating estimates. That said, it’s worth noting this is the lowest beat rate we’ve seen since 2022.
Revenue beats are the lowest in over a decade.
The latest earnings data is even more concerning when you consider that most tariff implementations occurred after Q1—and there was a significant wave of pre-ordering aimed at front-running those increased costs. In theory, this should have provided a tailwind to reported sales. While it’s still early in the earnings cycle and things could shift, the initial read is anything but encouraging.
The real impact of tariffs will hit in the next two quarters. How much investors are willing to look through soft results will likely hinge on the speed at which the Trump administration strikes deals with key trading partners—chief among them, China.
Late last week, we got a few nuggets suggesting progress is being made on that front. Even talks with China are reportedly underway. These are meaningful headlines, and we believe they further support our conviction that a tradeable low is in place. We nailed that low in our 4/6 report and used the strength that followed to tactically unwind long positions and cover our short volatility idea.
Yes, the tariff situation remains fluid—and, yes, more volatility is likely. But in our view, we’ve moved past the point of maximum uncertainty. Bears betting on a deeper collapse may still be proven right if tariffs drag on with no resolution. We don’t disagree with that logic—but we focus on price first. Markets don’t wait for clarity—they price in uncertainty quickly and often overshoot.
Three weeks ago, we were staring into an abyss. Retaliatory headlines were flying. Visibility was zero. But after a full-blown market tantrum, the administration (with the exception of China) began softening its stance. That change matters. Major market reversals don’t happen in a vacuum—they happen when expectations shift. This was a repricing of risk, plain and simple.
Until new information emerges, we believe the worst-case scenario has been priced in—and that means the 4/9 low was likely a durable, tradeable bottom.
When markets speak, we listen.
What does that mean in practice? The S&P 500 found support almost precisely at the 4800 level—our downside target from the 4/6 report. That level holds technical weight: it marks the 2021 peak and aligns with the 50% retracement of the entire bull market. That’s not coincidence.
More importantly, the bounce off that level was emphatic. If you’ve followed our work, you know we place a lot of weight on how price behaves at critical junctures. Just like we warned in our 3/30 report to exit trading longs before the SPX sunk an additional 10%:
“What has changed is the rejection from the 200-day MA. We believe the market speaks through price, and last week’s loss of the 200-day and the gap that propelled us above it is not a bullish signal for the indexes…we have to assume more downside for the stock market.”
Fast forward to today, and the reversal candle that’s formed off our target zone is sending a very different message.
Would you call that weekly candle a statement by the bulls?
We would.
Perhaps most importantly, the reversal occurred precisely at the 50% retracement level. Coincidence? Maybe. Or maybe the market was telling us something significant.
We’ll let you decide.
Let’s take a closer look.
